Washington, Jan 13: Warning that parts of the world including Pakistan may become safe havens for new terrorist networks, President Barack Obama made protecting the American people and going after them his top priority.

But in a powerful speech on Tuesday night he rejected Republicans' suggestion that the spread of the Islamic State across much of the Middle East and the group's apparent widening of its target list to Europe and the United States posed a threat to America itself.

He mocked the contention that fighters on "on the back of pickup trucks and twisted souls plotting in apartments or garages" represented an existential threat to America.

"As we focus on destroying ISIL, over-the-top claims that this is World War III just play into their hands," Obama said delivering the last State of the Union address of his presidency to the US Congress.

"They do not threaten our national existence. That's the story ISIL wants to tell; that's the kind of propaganda they use to recruit," Obama said, warning against pushing away vital Americans allies in the Middle East by "echoing the lie" that the group represents Islam.

"Our foreign policy must be focused on the threat from ISIL and Al Qaeda, but it can't stop there," he said.

"For even without ISIL, instability will continue for decades in many parts of the world - in the Middle East, in Afghanistan and Pakistan, in parts of Central America, Africa and Asia.

"Some of these places may become safe havens for new terrorist networks; others will fall victim to ethnic conflict, or famine, feeding the next wave of refugees," Obama warned.

"The world will look to us to help solve these problems, and our answer needs to be more than tough talk or calls to carpet bomb civilians," he said. "That may work as a TV sound bite, but it doesn't pass muster on the world stage."

Obama's comments appeared aimed at two Republican presidential candidates - Ted Cruz, who has warned he would carpet bomb ISIS and Marco Rubio, who says America is waging an existential fight against radical Islamic terrorism.

He also urged Americans to reject the politics of tribalism and fear that have rocked the campaign to find his successor and to build a "clear-eyed, big-hearted" and "optimistic" nation.

"As frustration [with politics] grows, there will be voices urging us to fall back into tribes, to scapegoat fellow citizens who don't look like us, or pray like us, or vote like we do, or share the same background," Obama said in an apparent reference to Republican front runner Donald Trump's suspicious attitude toward immigrants and Muslims.

"We can't afford to go down that path. It won't deliver the economy we want, or the security we want, but most of all, it contradicts everything that makes us the envy of the world."

Satya Nadella, Indian-American Chief Executive Officer of Microsoft, was among the 23 special guests "who have inspired Barack" and representing "the progress we have made" over the last seven years watching Obama's address from the First Lady's Box.

The Republican party fielded one of its rising stars, South Carolina's Indian-American Governor Nikki Haley, who is widely speculated as a possible vice presidential nominee, in its official televised response to the President's address.

Painting an unflattering picture of Obama's America Haley said: "The President's record has often fallen far short of his soaring words."

She also took a shot at Obama's foreign policy record, saying a Republican president would "make international agreements that were celebrated in Israel and protested in Iran, not the other way around."